Legacy Thinking And Blockchain: Bridging The Gap

Blockchain has taken center stage in the fast-moving world of technological progress. The explosion of cryptocurrencies, especially now that bitcoin’s price has exceeded the $4,000-mark, has ushered in an era of unprecedented hype. Startups and established enterprises alike are all rushing to establish their own blockchain presence.

These blockchain ventures seek to build innovative services on top of the technology while venturing into verticals beyond finance. Regardless of the nature of these efforts, a key challenge is to overcome legacy thinking.

The epic rise of Blockchain technology and Cryptocurrencies is shaping the face of traditional financial industries for both companies and consumers. Nevertheless, legacy systems still play a major role in the general public's mindset of adopting these new concepts.

One of the main things holding back customer adoption is the lack of legacy financial services, which are available. This is precisely why we built a blockchain payment gateway to bridge that of legacy financial services with that of innovative technologies available via blockchain, says George Basiladze, CEO and co-founder of UK-based Cryptopay, a global payment gateway and a provider of bitcoin wallets and debit cards.

I spoke with Basiladze to get a better understanding of how blockchain – and Cryptopay – are ushering in a new era of finance, and about the possibility of blockchain as a banking alternative to the masses.

Bridging the Familiar

New bitcoin users might find part of the experience different from what they’re used to. For instance, digital wallets are now enjoying increased adoption. However, a bitcoin wallet doesn’t function like Apple Pay or Android Pay’s digital wallet. Rather than being an interface linked to the user’s funding sources to allow quicker checkouts in the case of Apple Pay, a bitcoin wallet is used to store and manage bitcoin. This is often a tricky concept to grasp for those new to bitcoin.

We depend significantly on legacy financial services as it is our model to introduce these traditional and trusted services to our crypto customers. It will take more time to see mainstream adoption but its already bigger then what it was even a year ago, Basiladze said.

Indeed, the new can come in a familiar package. New bitcoin services seek to address the early adoption challenge by linking part of their experience to familiar financial services.

Cryptopay offers comprehensive means for users to manage their bitcoin with a hosted bitcoin wallet that allows for sending and receiving bitcoin. Aside from the wallet, Cryptopay allows for buying and selling of bitcoin using fiat currency.

However, instead of simply limiting the experience to just bitcoin, the company provides integrations with a legacy financial service. Users could withdraw their bitcoin to their bank accounts or even avail of a Visa debit card that draws from their bitcoin as funding source. This way, users are able to use bitcoin without completely overhauling the way they approach their finances.

Changing the mindset

People often have their set ways of doing things, with early adopters usually being the minority.

We can clearly see this reality in current consumer behavior. Despite the rise in cashless payments adoption, cards still dominate as the preferred payment method. According to a TSYS survey, 75% of U.S. consumers still choose either debit or credit cards to pay for purchases. Even for online purchases, incumbents such as PayPal are still preferred over bitcoin. Cryptocurrencies still have yet to truly challenge these established payment methods.

New customer experiences that force users to learn a whole new way of doing things would also typically face much resistance. This is why most developers would continue to anchor their interfaces to what’s familiar. For this to change, blockchain services must be able to ease people into the technology.

Innovation also needs favorable environments to flourish. In the case of blockchain, it’s starting to gain some success in select verticals aside from payments such as remittance and in markets such as developing countries. However, wider adoption of blockchain and cryptocurrencies is stalled by the lack of fitting governmental regulation.

Financial services are highly-regulated. Due to the newness of blockchain, many of these services technically fall into legal gray areas depending on the market. Governments are still to coping with these new developments and inertia and legacy thinking by politicians and regulators can stall progress in coming out with new regulations.

Another key aspect holding back mass adoption is regulation. Without a clear regulatory framework, many investors and businesses are still nervous to be associated or involved with crypto related activities but as the ecosystem grows so will the options to increase consumer adoption, shares Basiladze.

Japan has given blockchain and bitcoin a major boost towards global legitimacy. Its move to declare bitcoin a legal payment method has encouraged retailers to support the cryptocurrency. However, such changes, while positive, also puts pressure on all stakeholders to cope.

Aside from these legal and regulatory concerns, there’s also the practical issue of implementation. Bitcoin payment processing must be integrated with existing merchant and banking services. Legacy financial services that power most of commerce such as banks don’t provide support cryptocurrencies yet. Thus, blockchain services have to strive towards building ecosystems that make transition easy for adopters.

Coping with changes

Innovators must also be agile enough to cope with new developments. In the case of blockchain, new platforms with functionalities such as smart contracts and the ability to create cryptocurrencies have emerged and are bringing about further disruption.

Barriers have also been lowered leaving room for new players to participate. The upside of increased competition is that it fuels innovation. Blockchain startups are also now capable of launching their own initial coin offerings (ICOs) for funding. ICOs allow them to sell their own cryptocurrency token to investors and the recent successes of ICOs where companies are able to secure 9-figure funding proved its viability.

The company, while keeping its innovation plans close to the chest, plans to offer additional services including a foray into stocks brokerage. It’s also set to support other cryptocurrencies such as ether and litecoin.

Our ICO was launched on August 16th at the world’s first ICO hypethon taking place in St Petersburg Russia. The ICO itself will be what we launch in order to build our stocks brokerage offering. The current landscape for foreigners to actually invest in shares is ridden with friction and our goal is to unravel this complexity, said Basiladze.

When looking at the ecosystem currently there are not many others projects taking the approach we are especially with the fact that we have been running for over 4 years now and can prove a working scalable product. Competition at the moment in blockchain is what creates a healthy marketplace and we look forward to watching the industry flourish as a result.

While some ICOs have been met with some criticism and concern, they are effectively disrupting venture capital and are widely unregulated thus providing limited safeguards to investors. Those interested in investing must perform their due diligence in order to identify legitimately founded organizations with viable business models.

Bridging the Gap

Legacy thinking can truly hinder the acceptance of blockchain. Its success is heavily dependent on developments of both the services themselves and the markets in which they intend to serve.

Service providers must be able to provide and experience that is fresh yet familiar for the average consumer to transition easily. In addition, the industry and governments must also be able to create better environments for innovation to thrive. Regulatory bodies must accelerate putting up rules that should not only protect consumers but also be flexible enough to accommodate these new ways of doing things.

The future is very bright when it comes to payments and financial services overall. For decades we have been working with legacy antiquated systems and have come to a point now where it’s not efficient to continue. Blockchain has come along to unravel the complexity built up over the years and provide a truly secure, immutable, and scalable infrastructure, which has never been achieved, Basiladze added.

Basiladze has his work cut out for him, but the current winds seem to be blowing in his favor.

This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. I have no positions in any of the securities mentioned above.